Netflix Results Show Deluge Of Streaming Media Demand, With Tempered Growth Coming Later

Call it, in a way, the power of the lockdown.

As we’ve detailed in this space in the past, the coronavirus has shifted all manner of commerce and consumption toward online conduits.

Nowhere is that more apparent than in the continuing shift to streaming media –specifically in Netflix’s first-quarter results, which showed a boost in subscribers well beyond even its own projections, buoyed by a surge in March as lockdowns became the law of the land pretty much around the globe.

That comes as the company said it added 15.8 million paid subscribers in the quarter to reach a current roster of 182 million, globally – boosted, of course, by the fact that people are staying home by necessity due to the coronavirus.

The latest tally far eclipses the previous record, where the company added 9.6 million net paid subscribers, in the year-ago first quarter. Analysts had expected the company to add 8.2 million subscribers – and the company itself had projected it would add seven million.

The flurry of subscriber signups, subscriptions and streaming helped propel revenues up 28 percent to $5.8 billion. Earnings surged to $1.57 a share, from 76 cents a share last year – and better than the $1.64 per share that analysts had expected.

Separately, in an interview on Tuesday (April 22) with MarketWatch, Wendy Johansson, vice president of experience at digital consulting firm Publicis Sapient, said the streaming media firm has given rise to a “virtual, cultural norm” that has led the firm to exist in “the sweet spot of technology, user experience and content.”

Perhaps not surprisingly, March proved to be the tailwind to accelerating growth. In a letter that accompanied earnings, management said that “during the first two months” of the quarter, “our membership growth was similar to the prior two years … Then with lockdown orders in many countries starting in March, many more households joined Netflix to enjoy entertainment.”

The company said that post-production is underway on more than 200 projects. During the earnings discussion, Ted Sarandos, chief content officer, said that “within a few days of the shutdowns, we had production up and running remotely, post-production up and running remotely, animation up and running remotely, pitch meetings happening virtually and writers’ rooms assembling virtually.” He noted that 2020 projects, spanning series and films, have already been shot and are in post-production.

With a nod to series including “The Crown” and a scheduled fourth-quarter release of the animated “Over the Moon,” Sarandos said that “we don’t anticipate moving the schedule around much, and certainly not in 2020.” He said production schedules will return with schedules varying by geography.

With some granularity on subscriber activity, Greg Peters, chief product officer, said that during January and February within the U.S. and Canada, there was a return to normal churn levels pre-dating the price increases seen last year.

Peters said during the post-earnings release commentary that the firm will continue to “test and refine and improve” a range of promotional strategies, adding that on mobile, “it’s a plan that we’ve tested for a while.” He noted that the company has rolled out mobile offerings across India, Malaysia, Indonesia, Thailand and other countries.

Discussing the competitive dynamics between Netflix and Disney in India, Peters said the mobile plan is part of a broader effort to become more attractive to members and would-be members in that country.

Said CEO Reed Hastings of the Disney efforts, where the mouse house has notched 50 million subscribers in its latest publicly announced tally, “I’ve been so impressed with the Disney+ execution. Over 20 years of watching different businesses, incumbents, like Blockbuster and Walmart and all these companies, I’ve never seen such a good execution of the incumbent learning the new way and mastering it.

“And then to have them achieve over 50 million in six months, it’s stunning,” he continued. “So to see both the execution and the numbers line up, my hat’s off to them. Are we taking up our kids and family content and animation? You bet.”

And yet, a surge of growth may mean slower top-line traction moving forward. As Netflix said in its earnings letter, “some of the lockdown growth will turn out to be pull-forward from the multi-year organic growth trend, resulting in slower growth after the lockdown is lifted country by country. Intuitively, the person who didn’t join Netflix during the entire confinement is not likely to join soon after the confinement.

“Plus, last year we had new seasons of ‘Money Heist’ and ‘Stranger Things’ in Q3, which were not planned for this year’s Q3. Therefore, we currently guess that Q3’20 and Q4’20 will have lower net additions than last year due to these effects.”

For now, though, the appetite for streaming media seems insatiable.